Madras H.C : The Appellant Society is not entitled for Registration under Section 12AA of the Income Tax Act

High Court Of Madras

Gowri Ashram vs. Director Of Income-Tax (Exemptions)

Section : 2(15), 12AA

Mrs. R. Banumathi And K. Ravichandrabaabu, JJ.

T.C. (A) No. 91 Of 2013

April  29, 2013

JUDGMENT

Mrs. R. Banumathi, J. – Being aggrieved by the order of Tribunal in I.T.A.No.1504/Mds/2012 dated 09.10.2012, the assessee has filed this appeal raising the following question of law:-

“Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal is right in law in coming to the conclusion that the Appellant Society is not entitled for Registration under Section 12AA of the Income Tax Act?”

2. The assessee Gowri Ashram, Tiruvottiyur, Chennai is a society, registered under Tamil Nadu Societies Registration Act, 1975. The assessee society is governed by a Scheme Award framed by the District Court, Tiruvallur. The assessee Trust filed an application for registration under Section 12AA of the Act. In the said proceedings, the Director of Income-tax (Exemptions) noticed from the assessee’s income and expenditure account that it had offered income under the head rental income from the shops let out as well as it got certain collections from the Kalyana Mandapam owned by it. Before the DIT (Exemptions), the assessee claimed that the main object of the Society is to provide accommodation and facilities to poor and needy for the performance of functions and ceremonies and for temporary sheltering. Rejecting the contentions of the assessee, DIT(Exemptions) held that the assessee Trust is maintaining Kalyana Mandapam, which is definitely a commercial venture. DIT(Exemptions) also held that the receipt of rental income from the Kalyana Mandapam and from 21 shops, which are situated in the ground floor of the Kalyana Mandapam has been confirmed by the assessee and that all the income and expenditure are relatable to the maintenance of Kalyana Mandapam and shops and that the shops and activities are not in conformity with the definition of charitable objects under Section 2(15) and rejected the application filed for registration under Section 12AA.

3. Being aggrieved by the rejection of the application, the assessee preferred appeal before the Appellate Tribunal. Referring to the objects in the Scheme Award, Tribunal held that the assessee Society has to provide accommodation and facilities for performance of marriages and all other auspicious functions of members of a particular community, viz., Telugu Beri Vysia Community, primarily and also for performance of similar functions by a religious group and that the objects of the Society do not come under the purview of Section 2(15) of the Act and dismissed the appeal of assessee.

4. The learned counsel for the assessee society submitted that the Tribunal erred in holding that the activity carried on by the assessee is not towards charitable purpose and in coming to the said conclusion, Tribunal erroneously noted the Article set out in the Scheme award relating to the running of the choultry alone and erroneously arrived at the conclusion that the objects are targeted towards a particular community alone. According to the assessee society, the bye-laws of the society make it apparent that the objects are more diverse without restrictions and specifically deal with relief to the poor. The learned counsel further submitted that the Tribunal erred in coming to the conclusion that the objects of the assessee do not include any relief to the poor and there is no activity carried on by the appellant in the said direction and the evidence produced by the assessee showing that the assessee is actively engaged in charitable activities was not taken note of by the Tribunal. The Tribunal erred in rejecting the claim for registration under Section 12AA of the Act on a totally different ground from that adopted by the Commissioner of Income-tax.

5. Learned counsel for the revenue took us through Clause 18 of the Scheme award and submitted that the objects of the assessee society is to provide accommodation and facility for performance of marriage functions of the members of a particular community and similar auspicious functions by other Hindus and the said activity cannot be said to be charitable purpose within the meaning of Section 2(15) of the Act and the Tribunal rightly dismissed the Appeal.

6. The assessee society Gowri Ashram is governed by Scheme Decree framed by District Court, Tiruvallur in Scheme O.S.No.2 of 1958. By a reading of the Scheme Award, it is seen that the administration of the choultry is known as Gowri Ashram and in the Scheme award wherever the word CHOULTRY, occurs in the Scheme shall mean and include the choultry known as Gowri Ashram. The same is evident from Clauses 1 and 2(1) of the Scheme Award, which reads as under:

1. The Administration of the Choultry known as GOWRI ASHRAM more particularly described in the Schedule to the plaint and its assets shall be administered in accordance with the provisions of this Scheme.

2. (1) The Word CHOULTRY wherever it occurs in this Scheme shall mean and include the choultry known as GOWRI ASHRAM in the Village of Thiruvottiyur, Chenglepat District, together with its compound, appurtenant buildings and structure and all endowments attached thereto.

7. The administration of the Choultry Gowri Ashram is governed by the Scheme Award. The objects of the assessee society and use of the choultry is provided in Clause 18, which reads as under:-

The object and use of the Choultry is to provide accommodation and facilities for the performance of marriages and all other auspicious functions of the members of The Telugu Beri Vysia Community primarily and also for the performance of similar auspicious functions by other Hindus.

By reading of Clause 18, it is clear that the assessee society has to provide accommodation and facilities for the purpose of marriages and other auspicious functions of the members of Telugu Beri Community particularly and also for the performance of similar auspicious functions by a religious group.

8. Section 2(15) of the Income-tax reads as under:

‘”charitable purpose” includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility:

Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is [twenty-five lakh rupees] or less in the previous year’

9. Both Commissioner of Income-tax as well as the Tribunal recorded a concurrent finding that the objects and activities of the assessee society to provide accommodation and facilities for purpose of marriages and other auspicious functions of a particular community is not covered by the definition of charitable purpose within the meaning of Section 2(15) of the Income-tax Act.

10. The contention of the appellant is that the Tribunal erroneously noted Clause 18 in the Scheme Award, which relates to the running of the Choultry alone and erroneously reached the conclusion that the objects are targeted towards a particular choultry alone. There is no merit in the contention of the appellant that Clause 18 of the Scheme award relates only to use of the choultry. As pointed out earlier, in paragraph No.6, as per clause 1 and 2(1) of the Scheme award, the word choultry,wherever it occurs in the Scheme shall mean and include the choultry known as Gowri Ashram, i.e., Choultry and assessee Gowri Ashram are one and the same and therefore it cannot be said that the Tribunal erred in referring to Clause 18 in the Scheme award.

11. Clause 18 of the Scheme Award contains the objects of the assessee society with which it was formed. Resolutions are said to have been passed in November 2008 explaining the objects of the assessee society and the same was incorporated in Memorandum of Association of M/s.Gowri Ashram while renewing the registration of the Society. In the said Memorandum of Association, the objects of the Assessee society is stated as to provide accommodation and facilities to the poor and needy for the purpose of functions and ceremonies and for temporary shelter and to undertake Annadanam to public and other forms of poor feeding; to work for the development of any games or sports activities; to help poor students for their education based on merits by way of scholarships,etc., to undertake and provide medical care to the poor and the needy. The said objects and activities of the society by way of minutes of the Board of Societies in the year 2008 appears to be expansion of the objects and activities of the assessee. Being governed by the Scheme Award, the expansion of objects and activities has to be approved by the Court, which framed the Scheme Award. In fact, the assessee has moved an Interlocutory Application in the Court of Principal District Judge at Tiruvallur in Scheme O.S.No.2 of 1958 to permit the Assessee – Gowri Ashram to expand the new objects pertaining to distribution of scholarships, celebration of other festivals, conducting sports and cultural activities, helping poor and destitute people from the weaker sections of the community/society and to help the needy people. The said Interlocutory Application filed before the District Court, Tiruvallur is stated to be pending. Unless expanded objects of the assessee are approved and incorporated in the Scheme Award, the assessee cannot claim to be the Trust with charitable purpose. Since the object of the assessee society is only to benefit a particular community, primarily, Telugu Beri Vysia community and for performance of similar functions by other Hindus, the Tribunal rightly dismissed the appeal and we do not find any substantial question involved in this appeal.

12. In the result, the appeal is dismissed. However, it is open to the assessee society to renew its application as and when its expanded objects of the Society are approved by the competent Court.

[Citation : 356 ITR 328]